News

London

Demand for prime retail to remain relatively strong during Q4; 2011 year end volumes likely to exceed €28 billion, up by 35% on last year and significantly above 2009 (€12.3 billion).

London, 20th October 2011 – Jones Lang LaSalle reports that retail real estate investment remained strong throughout the summer, despite the volatile European recovery and economic headwinds that continued to face the sector. Direct investment in retail real estate in Europe during the third quarter of 2011 reached €6.7 billion, up from €4.9 billion in Q2 2011 and significantly up on the €3.8 billion transacted in Q3 2010. Total investment volumes for the year to date now stand at €20.4 billion, up by 45% over the same period last year, almost on a par with total 2010 volumes and far exceeding full year volumes of €12.3 billion in 2009.

Appetite for retail remained strong, accounting for 30% of all commercial real estate transactions in Q3. Shopping centres remain dominant within the sector, accounting for 66% of total retail investment volumes.

The majority of investment activity remained focused in the UK and Germany, accounting for 50% of total volumes over the quarter. Transaction volumes in the Czech Republic totalled €603 million, boosted by the largest transaction of the quarter, Meyer Bergman and Healthcare of Ontario Pension Plan’s purchase of Forum Nova Karolina in Ostrava and Forum Usti Nad Labem for €300 million from Multi Development.

Poland, one of the growth markets of last quarter, continued to see healthy transaction volumes in Q3 (€510.5 million), boosted by the €237.5 million purchase of a 50% interest in Galeria Mokotów in Warsaw by Unibail-Rodamco and Blackstone’s purchase of Magnolia Park in Wroclaw for €222.5 million.

Combined, Poland and the Czech Republic represent Central and Eastern Europe's retail investment powerhouses with combined investment volumes of €1.7 billion in the year to date, up significantly on full year volumes of €1.4 billion and €323 million for 2010 and 2009 respectively.

James Brown, Head of EMEA Retail Research commented, “Looking forward to 2012, the economy and the retail industry in particular, are facing significant headwinds across Europe. Caution will remain at the forefront of consumer, retailer and real estate investor minds going forward into next year. Prospects vary greatly across Europe at both country and city level. The multi speed recovery applies as much to cities as countries, and in some instances the outlook at country level masks the extent of out-performance within some major European cities.”

Jeremy Eddy, Head of EMEA Retail Capital Markets adds, “There is a danger that investors are becoming too generic and not looking at asset fundamentals but discounting opportunities due to macro concerns at country level. We believe that attractive opportunities still exist, even in the troubled southern European economies; each opportunity, however, needs to be assessed on a ‘micro’ level, based upon the specific attributes of the asset.”

Jeremy Eddy, continues, “Whilst the European recovery remains extremely volatile the demand for prime retail assets remains strong. The depth of equity which we are currently witnessing in our sales processes highlights the continued demand for core product and the lack of reliance upon the debt markets, which clearly remain challenging.”

We expect demand for prime retail to remain relatively strong during Q4 and forecast an outturn for 2011 to exceed €28 billion, up by at least 35% on last year and significantly above 2009 (€12.3 billion).